The Centre is set to revise the eligibility criteria and calculation methods for payment of bonus and gratuity to formal sector employees following the implementation of the new labour codes.

The Code on Wages, which subsumes the Payment of Bonus Act, provides for annual bonus payment to employees drawing wages under a ceiling notified by the appropriate government. The employer is mandated to pay a minimum bonus of 8.33 per cent of the salary earned by the employee or an amount notified by the government, whichever is higher. The bonus is capped at a maximum of 20 per cent of the wages, subject to the company’s allocable surplus.

In 2015, the government had notified that employees drawing a monthly salary of ₹21,000, up from ₹10,000 earlier, are entitled to a bonus. The calculation ceiling was increased from ₹3,500 to ₹7,000 or the minimum wage, whichever is higher.

Government sources said the revision, effected almost a decade ago, needed to be updated to match the increase in wages. The revision is expected to be notified soon to ensure that deserving low-paid workers get the benefits. However, the government is yet to decide on the new eligibility and calculation formulas. Once the Centre issues the notification, state governments have to revise their formulas.

Employees working for less than five years in a company will now be entitled to gratuity. Under the existing Payment of Gratuity Act, workers are required to have served five years to get gratuity at the rate of 15 days’ wage for the number of years served.

The Code on Social Security has retained the five-year provision for payment of gratuity for regular employees. However, it has introduced a provision saying that workers engaged under fixed-term employment (FTE) or short-term contracts will be entitled to gratuity on a pro-rata basis. It means that if an FTE employee quits after one year, they will get gratuity.

All India Trade Union Congress (AITUC) general secretary Amarjeet Kaur said the new labour codes had incorporated some of the long-standing demands of trade unions while including many more employer-friendly and anti-worker provisions.

“We have been demanding the removal of the ceiling for payment of bonus and payment of gratuity on a pro-rata basis. The government has not removed the ceiling but plans to revise it to claim that the new codes are worker-friendly. But primarily, these laws are anti-worker,” Kaur said.

She cited liberal rules for firing workers, promotion of contractual appointments and lack of clarity on social security funds as major lacunas in the new labour laws.

Labour economist K.R. Shyam Sundar, an adjunct professor at MDI Gurgaon, said the FTE, which the government had been promoting since 2014, had replaced regular appointments across establishments. “Since FTE has become the norm, the gratuity benefits are being passed on to them (to make contract jobs appear attractive),” Sundar said.